Check The Invoices or Purchase Orders You Receive to Make Sure They Don’t Create a Contract With Terms You Don’t Want

In some circles this topic is called the battle of the forms. The ordering that takes place between a brewer, distiller, wholesaler or a vintner and the suppliers that provide things like bottles, corks, caps, ingredients, gas, even office supplies, isn’t always done under a written contract where the parties set out their agreement and then commence performing their obligations. Quite often an order is placed over the phone or online – perhaps terms are discussed, perhaps they aren’t, goods are shipped and received, payment is made. Sometimes payment is made before the goods are received. In an online transaction its likely that a supplier provided terms regarding things that aren’t germane to the contract that the purchaser had to accept before the order could be placed – things like whether or not French or Mississippi law will govern the parties disputes or whether legal disputes need to be made in Ghana – aren’t usually part of a bargain for an order over the telephone. Online the terms are likely accepted without being read. Sometimes, if payment is made after receipt, a supplier will send an invoice with terms that had nothing to do with anything that was discussed printed on the back of the invoice like this. Sometimes a buyer beats the supplier to the punch by sending a purchase order with terms printed on the back.

99% of the time none of these terms will ever matter. Most often the product that shipped is what the buyer wanted and payment is made and the parties go about their business. But when a problem does arise, one of the first things you’re going to want to check is whether you’ve sent, or been sent, some form agreement and figure out whether or not it is applicable.

For instance, if I paid for my grain or bungs over the phone with a credit card, and no terms beyond the identity and quantity of my goods was discussed during the order, then when I got them there was an invoice including a term that I had to settle disputes in Kenya, it would seem unfair that such a term would be enforceable.

The law has attempted to deal with many of these problems through the separate states’ adoption of versions of the Uniform Commercial Code. This is a statute that governs sales of items and imposes terms on all parties engaged in commerce of certain kinds. There are also international treaties that govern commercial transactions in the same way. Unless the parties agree to something, or a party was aware of a term and that the term was a condition of the contract performance, it’s likely to result in a bit of a legal dispute.

In the case of Chateau Des Charmes Wines, Ltd. v. Sabate USA Inc., a cork maker, Sabate, contracted with a winery, Chateau Des Charmes Wines, to provide corks that it claimed would not cause wines to be spoiled by cork taint. The winery agreed by telephone with Sabate USA to purchase a certain number of corks at a specific price. The parties agreed on payment and shipping terms. No other terms were discussed, nor did the parties have any history of prior dealings. Later that year, Chateau des Charmes placed a second telephone order for corks on the same terms. In total, Chateau des Charmes ordered 1.2 million corks. (Much of the following factual background is taken directly from the opinion)

Sabate France shipped the corks to the winery in eleven shipments. For each shipment, Sabate France also sent an invoice. Some of the invoices arrived before the shipments, some with the shipments, and some after the shipments. On the face of each invoice was a paragraph in French that specified that “Any dispute arising under the present contract is under the sole jurisdiction of the Court of Commerce of the City of Perpignan.” On the back of each invoice a number of provisions were printed in French, including a clause that specified that “any disputes arising out of this agreement shall be brought before the court with jurisdiction to try the matter in the judicial district where Seller’s registered office is located.” Chateau des Charmes duly took delivery and paid for each shipment of corks. The corks were then used to bottle Chateau des Charmes’ wines.

Chateau des Charmes claimed that it subsequently noticed that the wine bottled with Sabate’s corks was tainted by cork flavors. Chateau des Charmes filed suit in federal district court in California against Sabate France and Sabate USA alleging claims for breach of contract, strict liability, breach of warranty, false advertising, and unfair competition. Sabate France and Sabate USA filed a motion to dismiss based on the forum selection clauses. The district court held that the forum selection clauses were valid and enfoceable and dismissed the action. The winery appealed the decision and the appellate court reversed finding that the United Nations Convention on Contracts for the International Sale of Goods (CISG) governed the substantive question of contract formation as to the forum selection clauses because this case arose out of an agreement for a sale of goods from a French party and a U.S. party to a Canadian party. Under the CISG, the forum selection clauses weren’t a part of any agreement between the parties because the oral agreements between the parties as to the kind of cork, the quantity, and the price were sufficient to create complete and binding contracts, and the terms of those agreements did not include any forum selection clause:

“Nothing in the Convention suggests that the failure to object to a party’s unilateral attempt to alter materially the terms of an otherwise valid agreement is an “agreement” within the terms of Article 29. Cf. C.I.S.G., art. 8(3) (“In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.”). Here, no circumstances exist to conclude that Chateau des Charmes’s conduct evidenced an “agreement.” We reject the contention that because Sabate France sent multiple invoices it created an agreement as to the proper forum with Chateau des Charmes. The parties agreed in two telephone calls to a purchase of corks to be shipped in eleven batches. In such circumstances, a party’s multiple attempts to alter an agreement unilaterally do not so effect.”

So there are two lessons here. First, make sure that someone’s not trying to pull a fast one on you by including terms you don’t want or agree to after the fact. And second, understand that an attempt to alter a contract after performance with an invoice or a letter or some other communication may be a flawed method for including terms that should have been negotiated or included in an offer or acceptance before performance.